Our eight-step plan to reform the broken student loan program

We have all heard calls from many quarters for meaningful and innovative reform of our postsecondary education system. Surviving in a global marketplace means ensuring young people have the education they need to compete. But have we forgotten the student loan system that is supposed to support our learning infrastructure in Canada?

The Canada Student Loans Program, providing eligible students with financial aid, was implemented by Prime Minister Lester B. Pearson in 1964. But since then, the system has developed into a complicated patchwork of federal and provincial programs that successive governments continue to tinker with. Substantial increases in tuition fees and living costs over the past few decades have made things even more difficult for students; many are now graduating with well over $25,000 in debt.

According to a recent Auditor General’s report, there are now more than 990,000 federal student loan borrowers, with a combined debt of over $8 billion. These borrowers have never had an independent voice representing their needs – until now.

This year, Mark O’Meara and I – both university graduates with degrees from UBC and SFU respectively – founded the Coalition for Student Loan Fairness, a national non-profit, non-partisan organization created to implement an eight-point plan to reform our broken student loan program. Mark O’Meara is a longtime advocate for student loan borrowers, having established the Canadastudentdebt.ca website years ago, offering borrowers a resource to help resolve their student loan problems. We are both student-loan borrowers who decided it was time to develop a plan aimed at fixing the student loan system.

These eight points were developed through our discussions with various stakeholder groups and individuals affected by the current student loan system.

Our mandate is already supported by many within the student movement and beyond. We have received official endorsements from the Canadian Alliance of Student Associations, several wings of the Canadian Federation of Students, the B.C. Coalition of People with Disabilities, the College Student Alliance, the Ontario Undergraduate Student Alliance and credit counseling agencies, such as Credit Counselling Canada.

Canadians might be surprised to learn that Canada has some of the highest student loan interest rates in the G8 – between eight and 11 percent – with interest compounded daily. Government figures confirm that over 75 percent of those who default do so in the first three years of repayment, when interest payments make up most of their monthly payments. In contrast, most G8 countries charge between zero and four percent in interest on student loans.

The Canadian interest relief program has been inadequate for years. To begin with, our coalition wants to see eligibility based on a borrower’s net, rather than gross, income. As well, we want to see annual adjustments in income thresholds to reflect inflationary pressures, and a more streamlined computer-based application process to help ensure fewer lost applications.

An ombudsperson office is also needed. Borrowers have no recourse if they are sent to collections in error. An ombudsperson with legislative authority is key to ensuring borrowers are treated fairly. Even MPs, who are often asked to assist borrowers struggling with the current system, frequently complain that current legislation allows them little room to help resolve disputes.

Although the integration of provincial and federal loan accounts is already underway in some provinces, the coalition believes that this process must be Canada-wide, ensuring borrowers are no longer juggling multiple loan accounts and multiple payments.

Borrowers are also entitled to accurate and timely statements; today many are unable to get these statements once they have defaulted. Hardship relief also needs improvement. The current Debt Reduction in Repayment program is inadequate and has never met its own targets for assisting borrowers in desperate need. Finally, the coalition wants to see the reinstatement of the six-month interest-free grace period, which was removed after the federal government assumed responsibility for direct lending to students some years ago.

These changes are far from radical. They are common-sense reforms that will improve the system so that our country can become more competitive in a global marketplace. Judging by the hundreds of visitors who have already logged on to our website and voted in our online petition, we believe our plan has found the right balance. The coalition’s website, meanwhile, has received over 15,000 hits since it was launched in April 2007, and we continue to grow.

It is now time for government to take action. If Canada truly wants to have a financial aid system that helps ensure successive generations can borrow effectively for their education, it must reform our broken student loan system.

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I was looking for help to resolve my student loan problems when I lucked on to your website. Reading the information on this page made me feel like I was reliving the last 10 years of my life.

I made every attempt to pay my student loans but I was unsuccessful. The loans went into default and every several years a new portion pops up and I am told that the government does not have to inform me of my debt because I lost all rights to information because I defaulted on my loans.

I feel like a criminal every time I speak to anyone about my loans. I can never get a straight answer. A new portion sent from that Royal Bank came recently (Graduated 1999) and I was told they could not get a hold of me. This was very surprising since I just recently closed my account (2 to 3 years ago) after being with them over 25 years

Are there any programs to assist me with my debt problems and collecting of my outstanding debt amounts?